NEW YORK (MainStreet) – Foreclosure filings hit a three-year low in February, according to RealtyTrac, a firm that monitors the market.
Foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 225,101 U.S. properties in February, a 14% decrease from January and a 27% decrease from February 2010.
The deep decline represents the biggest year-over-year decrease since RealtyTrac began issuing its report in 2005, putting last month’s foreclosure filings at their lowest level since February 2008.
However, Rick Sharga, RealtyTrac’s senior vice president, called the numbers “extremely distorted” and says they do not indicate a miraculous recovery. Instead he attributes the decrease to the foreclosure filing freeze, which prevented many distressed properties from hitting the market since it first went into effect last October.
This isn’t the first time RealtyTrac said its foreclosure statistics were being affected by the robo-signing controversy. Foreclosure activity decreased in October, November and December 2010 and only went up by 1% this January due to the backup in court proceedings.
However, Sharga admits the problem may be worse than his firm originally believed.
“We never expected the falloff associated with the paperwork issues to be so deep,” he said. Sharga explained that for now RealtyTrac is holding on to its belief that activity will spike again in coming months and remain high throughout the year until the filings start to legitimately fall in 2012.
Yet he said there is a possibility that the filing freeze could prolong the market’s recovery, since property values will not be able to rebound until a larger percentage of foreclosed properties are sold.
“The system is dysfunctional,” Sharga said. “It’s hard to gauge what it going to happen over the next few months.”